Steve Gunderson

President and CEO, Council on Foundations

This past October, the Council on Foundations chose Steve Gunderson to be its new president and CEO. Best known for his 16 years as a Wisconsin Congressman, Gunderson voluntarily left the U.S. House of Representatives in 1997. He joined the Greystone Group, which named him senior consultant and managing director of its Washington office, where his clients ranged from the Republican Main Street Partnership to the Mary Fisher AIDS Fund.

He recently was the lead author of The Jobs Revolution: Changing How America Works, which analyzes workforce investment and the global economy. He has also designed and led the implementation of the National Conversation on Youth Development in the 21st Century, sponsored by the National 4-H Council.

Gunderson currently serves on the Panel on the Nonprofit Sector and the advisory board of Partners in Surgery, a philanthropy that brings modern surgical techniques to the rural poor of Guatemala. He recently spoke with Philanthropy about his priorities for the Council.

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INTERVIEWER: What are the greatest challenges you see for the world of philanthropy?

MR. GUNDERSON: Philanthropy is going to grow in
size, there is no question about that. The questions we face are, how are we going to grow in service, and how are we going to deal with increased scrutiny? The degree to which we can spell out the impact of this sector will determine the way philanthropy is perceived by the media,
the public, and government.

INTERVIEWER: What changes would you most like to see in the current public policy framework for philanthropy?

MR. GUNDERSON: The most important change I would like is a strategic one. I’d like to see those of us engaged in philanthropy begin to define the agenda rather than respond to agendas defined for us and to us by Capitol Hill, the media, and others. I want us to create agendas that promote the growth of philanthropy in society. That’s the first priority.

The second is to find the appropriate balance between recognizing, on the one hand, that the charitable deduction given for philanthropy means we have a public trust that entails government scrutiny, and on the other hand, avoiding the real danger of overregulation. If you believe as I do that we ought to promote the growth of philanthropy, then it’s disturbing anytime you hear people say, “I created the foundation because I wanted to do good, but if I’m going to risk being charged with legal violations, I will just put my foundation out of business.” If public policy causes people to move from strategic, competitive grantmaking to just check-writing on December 31, then we have done society a disservice.

INTERVIEWER: What are your top concerns about proposed new regulations?

MR. GUNDERSON: I think the first issue we’re dealing with is charitable reform. We’ve addressed many of the major concerns we had with some of the initial drafts coming out of Capitol Hill—proposals that would hamper donors’ ability to participate in global philanthropy, and issues like that. We have a growing concern about possible disparities in the way different vehicles of philanthropy are treated, particularly donor-advised funds and supporting organizations.

The next big set of issues we face revolve around governance. While I believe in full transparency, there is a huge difference between transparent governance and the over-regulation of governance, such as the government dictating compensation for either board or professional staff, limits to transportation and administrative expenses, and those kinds of items. One size does not fit all. We have foundations of different sizes, we have different missions, we have different skill demands. Certainly a foundation in Alaska has transportation challenges that are very different from a foundation working within a large urban area, which is a good example of why you can’t dictate one set of rules and regulations to all foundations.

And foundations are just one section of a growing and diverse philanthropic sector. We need to be celebrating the diversity of philanthropy, not trying to impose one-size-fits-all restrictions on every kind of giving unit.

INTERVIEWER: You served 16 years in Congress and since then have continued to work closely with members. How much understanding of foundations and philanthropy do you think exists on Capitol Hill?

MR. GUNDERSON: Almost none. The reality is that when I was named to this position, many of my colleagues said: “You’re going to do what for whom?” And then I was named president of the Council on Foundations on August 17, took over on October 1, and during that six-week period we had Hurricane Katrina. I soon discovered that policy-makers, the media, and the general public don’t understand the difference between charity and philanthropy. That’s why, right before our “Foundations on the Hill” effort, we produced a brochure entitled, “The Role of Philanthropy in Natural Disasters,” articulating what philanthropy did in the 1989 San Francisco earthquake, the Oklahoma City bombing, September 11, and in Katrina, so that congressional members and staff would understand the importance of preserving an environment that fosters the growth of philanthropy as a benefit to all of society.

INTERVIEWER: What are the most important changes the philanthropy world could make to communicate better with Congress and other policy-makers?

MR. GUNDERSON: We have to recognize that we are an emerging part of the public discourse. I think many people in philanthropy believe that if they do good with their money, they shouldn’t have to engage in political conversations with elected officials at any level. We need to change this attitude, because if we don’t define philanthropy, the media and the politicians will. We must communicate with our elected officials, with the media, and through them with the general public about what philanthropy is and what it does.

The second thing to recognize is that as we grow as a sector, there will inevitably be some bad apples who will misuse the public trust and the charitable deduction for personal benefit. We need to be ready—as I think the Council has been—to take action when appropriate in those kinds of cases, because self-policing is much more desirable than additional federal or state regulation.

INTERVIEWER: The Council put the Getty Trust on probation from its membership. Could you explain the rationale both for the initial probation and for the reinstatement?

MR. GUNDERSON: Sure. It’s important to know that the activities the Council took in this case are related to our own ethics statement at the Council on Foundations. Everybody who becomes a member of the Council has to sign an ethics statement, and that ethics statement is the vehicle by which we can respond to charges of misconduct or misuse of funds.

When we conducted our own investigation into the Getty Trust’s conduct, we concluded that there were serious problems after they were unwilling to respond in a timely manner to our request for information. We didn’t make a decision on their guilt or innocence. We simply put them on a probationary status pending more cooperation with our investigation.

I personally recommended to the board that this be a public probation, because a confidential probation would have provided no incentive to the Getty to cooperate, nor would it have provided a message to Capitol Hill and others that we were willing to police our own sector. Obviously, some people didn’t agree with that, but I am convinced it was absolutely the right decision, because after they were placed on public probation, new leadership came into the Getty. They worked cooperatively and aggressively and positively on their governance issues. And so in this case, we were dealing with a member who wanted to correct the problems within their governance. They wanted to cooperate with us.

After they made the changes in governance that ensured the Getty board would exercise proper oversight of the trust’s activities, our board decided unanimously that they deserved to be restored to full standing as a member of the Council.

INTERVIEWER: Do you anticipate taking similar action against other foundations in the future?

MR. GUNDERSON: One of the greatest fears I have is that some politicians see the sector’s growth as an opportunity to level charges against the sector, sometimes for legitimate public policy reasons, but, unfortunately, sometimes for personal political gain. In either case, it is inevitable that we will have more charges brought against foundations, even though that will entail a very small number of the total foundations in this country. I would be surprised if any year goes by without some charge against some foundation that merits some level of review by the Council.

The important thing to note, however, is that almost all of the foundations we see in the headlines because of their conduct are not members of the Council, or The Philanthropy Roundtable, or the Association of Small Foundations. They tend to be people who are legally classified as foundations, but they have never joined their colleagues in pursuing appropriate conduct.

INTERVIEWER: Earlier you made a distinction between “charity” and “philanthropy.” In a previous interview, you implied that charity is inferior to philanthropy. Could you describe the differences you see? Would you rank one over the other?

MR. GUNDERSON: If at any time I have said or been quoted as saying that charity is inferior to philanthropy, then I need to be taken to task because that is absolutely wrong. I have said often that they are different and we need to understand that difference.

Charity tends to be a short-term, emotional, immediate response, focused primarily on rescue and relief, whereas philanthropy is much more long-term, more strategic, focused on rebuilding. One of my colleagues says there is charity, which is good, and then there is problem-solving charity, which is called philanthropy, and I think that’s the distinction I have tried to make.

When you and I go to church on Sunday morning and put money in that offering plate, that would be called charity. When we give a telethon donation to the Red Cross, Multiple Sclerosis, or Hurricane Katrina, that’s charity. It’s very different from philanthropy, and the distinction is important.

INTERVIEWER: Could you explain what you mean by “competitive grantmaking”?

MR. GUNDERSON: We at the Council are struggling with the question of who should and should not be a member of the Council, and who really is or is not a member of the greater philanthropic community. One attribute we want to see in a member is the use of competitive grantmaking.

I’ll give you an example. A United Way gives grants, but in most cases the grants are predetermined by the donors; that is, the United Way gives money to the Boy Scouts, 4-H, the Boys Club and Girls Club, cancer research, you name it, because individual donors have required that their money go to those worthy causes. The grant process does not involve competitive grantmaking in which decisions are made based on the merits of the grant requests.

Another example would be the typical college. In the past, colleges have said, “You give us money, and we will automatically give it to, say, the Liberal Arts School at the University of Wisconsin.” Well, that is wonderful, and I have done that, but it does not entail competitive grantmaking.

INTERVIEWER: You cancelled the Council on Foundation’s annual meeting for 2008, and you are changing the focus of the 2007 meeting. What objectives do you have for both the 2007 annual meeting and the 2008 Philanthropy Summit?

MR. GUNDERSON: I wouldn’t exactly say we have cancelled anything. We have changed the venue for 2007 and 2008. If we have cancelled anything in 2008, it would probably be that we cancelled Family Foundation meetings and the Community Foundation meetings so that we can bring everybody together under one larger, more comprehensive meeting that we call the Philanthropy Summit.

We have designed three annual conferences in a row, sort of a trilogy if you will, and each will build on the previous ones to help define this sector in terms of its philanthropic leadership roles. We have to help the philanthropic sector understand that the Council and the sector as a whole are now about more than just effective grantmaking—we are also about philanthropic leadership, that is to say, playing a role in the design of unique, creative, and successful responses to the challenges facing society.

So in 2006, in Pittsburgh, we introduced the concept of philanthropic leadership. In 2007, we are convening a year-long conversation on philanthropy and the challenges of our time, and we will come out of it with major papers on the role of philanthropy in addressing four specific issues: poverty, health care, the environment, and disaster preparedness and response. Then in 2008, we are bringing literally every element of philanthropy together at what we hope will be the largest gathering of people engaged in philanthropy at any time, at any place.

INTERVIEWER: Why is it necessary to add “philanthropic leadership” to the membership services role that the Council has long played?

MR. GUNDERSON: There is a great reason for that. One of my colleagues who is a senior statesman in the field often says, “At our foundation we can give away a series of grants this year that in the long-run have a disastrous impact on the people in the communities they are going to serve, that will, if anything, do more harm than good. And yet if our investment procedures are successful, we will have more money to give away next year than we have this year.” So it is not just a matter of giving money away legally. It is, more importantly, giving away money strategically, in ways that enhance people’s lives and make a difference.

INTERVIEWER: When any long-standing institution contemplates changes, some people become nervous about those changes. Are any objections being raised among your membership?

MR. GUNDERSON: Change is hard at any time, but change is especially hard in a sector that has been as “traditional” as philanthropy and the foundation world. We need to understand that, we need to respect that, but we need to recognize that we are positioning this sector for unparalleled growth and influence in service to society in the future. The question is, How do we lead this movement in ways that will maximize its contribution to the public good?

INTERVIEWER: You’ve written that the Council should be concerned not just with the process, but also with the ends of philanthropy, while avoiding ideology.

MR. GUNDERSON: Yes. First of all, what I strongly encourage is that we celebrate the diversity of philanthropy. There will be some foundations that want to sustain themselves for many, many years, and there will be some who will want to spend down and go out of business. Neither is right, neither is wrong. We ought to celebrate that diversity. There will be some foundations that have an ideological persuasion more to the right, some more to the left. I am not about to say one is right and one is wrong. I am here to celebrate a foundation’s right to make those particular decisions in a free society.

INTERVIEWER: Some prominent members of the Council have seemed at times to disdain small foundations and have called for minimum asset requirements for foundations. How do you see the role of small foundations in the Council and in society at large?

MR. GUNDERSON: First of all, I celebrate the diversity of thought that allows people to have different perspectives about who should or should not be a foundation or who could more effectively allocate their money, not towards administration, but towards specific programs within community foundations, et cetera.

I happen to come from rural America. I went to a two-room country school. I lived in rural America where, for us, the choices are a small foundation or none at all. So to me, small foundations are beautiful because they are our only hope in rural western Wisconsin and in much of the country. It gets back to that issue I discussed earlier—the need to recognize that one size does not fit all. Trying to run a small foundation in New York City may not be as viable as running a small foundation in rural western Wisconsin.

INTERVIEWER: The Council just named Barry Gaberman, the long-time Ford Foundation vice president, its Grantmaker of the Year. Could you explain how the Ford Foundation presents a model of philanthropy that the Council would like to encourage?

MR. GUNDERSON: First of all, it is important to recognize that we celebrated Barry Gaberman, not his employer. I think his life story is one of the remarkable stories of an American hero, someone who escaped the Holocaust by going East through China rather than West as many others did, who came here as, I believe, a first-generation survivor after World War II, and was able to make an amazing mark not only on the United States, but on the world in terms of dedicating his life to helping other people. Regardless of anybody’s political persuasion, we have to celebrate what he has done.

That being said, I think in all fairness, and I mean this quite sincerely, some people on the more conservative side of the American spectrum have made the Ford Foundation a convenient target in ways that I do not think is appropriate. Much of what the Ford Foundation focuses on is what I would call civil society—human and political rights all over the world. The Ford Foundation was engaged in funding Solidarity and in supporting human-rights movements in Eastern Europe, something most of us on the Republican side of the spectrum would certainly support. They were engaged in supporting efforts to bring down apartheid in South Africa, something Newt Gingrich, Vin Weber, Rob Walker, myself, and others when we were in Congress supported as well. They have had a number of programs that have promoted family economics, self-sustaining efforts such as their Kids Accounts, their home ownership programs, their education programs, and their microloan programs both at home and abroad.

At any foundation there may be individual grants we do not like, but I think in fairness, when you look at the overall mission and philosophy of the Ford Foundation, there is much there that is, frankly, quite similar to the underlying political philosophy of Roundtable members.

INTERVIEWER: You have not worked in a foundation previously. Have you served on a foundation board?

MR. GUNDERSON: Yes, I managed the Mary Fisher Family AIDS Network after I left Congress. Mary Fisher was the person who spoke at the 1992 Republican Convention in Houston and indicated that she was a woman with HIV/AIDS. Her father, Max Fisher, was one of the long-time premier fundraisers and activists within the Republican Party and certainly one of the great supporters of the Jewish community in Israel, in the United States, and elsewhere. So I have certainly had foundation experience, but I have not had anywhere near the kind of experience in philanthropy that one might assume would be the background of somebody coming into this job.

I have, however, had a life in serving leadership and as a change agent, and I think that became very important to the search committee when they looked for the next person to take over the Council. They saw this as a time that called for a full understanding of public policy and relationships with people on both sides of the aisle in the political arena.

INTERVIEWER: What question should we have asked you that we haven’t?

MR. GUNDERSON: I really believe we are all in this together. We serve a common interest, a common mission, and I am absolutely convinced that different organizations serve a mutual benefit to the overall cause. When you look at The Philanthropy Roundtable, the Council on Foundations, and the Association of Small Foundations, each of us has a different niche within this community of philanthropy, each of us has a different ability to reach different elected officials on Capitol Hill in ways that collectively serve the best interests of this sector. We have worked very hard to build new avenues of partnership, new avenues of communication and understanding, and that is good for all of us.